South Korea Proposes Record 820.9 Trillion Won Budget for 2027

South Korea's Cabinet approved a record 820.9 trillion won budget proposal for 2027 on Tuesday. The plan represents a 12.8 percent increase in government spending, driven by a surge in tax revenue from the semiconductor boom. The government intends to submit the proposal to the National Assembly on Thursday. Total revenue is projected at 880.8 trillion won, with national tax revenue expected to jump 49.8 percent to 584.4 trillion won.

A primary focus of the budget is the acceleration of artificial intelligence investment. Funding for semiconductors, physical AI, and AI data centers will nearly double to 21.3 trillion won. The Ministry of Trade, Industry and Resources specifically requested a record 13.26 trillion won to support the manufacturing AI transition and other megaprojects. Additionally, the Korea AeroSpace Administration is seeking 1.65 trillion won to nurture the space industry, including funding for Nuri rocket launches and lunar exploration.

Defense spending is set to surpass 70 trillion won for the first time, with a proposed 73.28 trillion won. This 8.2 percent increase is aimed at modernizing forces and accelerating the transfer of wartime operational control from the United States. Key allocations include 3.3 trillion won for the KF-21 fighter jet and nearly 100 billion won for a nuclear-powered submarine program. The budget also includes funds to transition the military toward AI and unmanned systems to counter a shrinking pool of conscripts.

Other significant increases include a record 22.2 trillion won for the Ministry of Agriculture, Food and Rural Affairs to support farm incomes and climate resilience, and an 82.6 trillion won budget for the Ministry of Oceans and Fisheries to drive maritime growth. The Ministry of Finance and Economy was allocated 39.7 trillion won to foster future growth engines and expand export financing.

While the spending increase is substantial, the government projects that the debt to GDP ratio will remain below 50 percent, estimated at 48.3 percent for 2027. The managed fiscal deficit is projected to narrow to 3.1 trillion won, or 0.1 percent of GDP.